A Quick guide to the very basics of setting up your solo business with Xolo in Estonia
Use Xolo's comprehensive FAQ to quickly find an answer, simply start typing the subject of your inquiry (e.g. VAT) and you'll see a number of suggestions covering the topic. Don't forget to log in to see all the available articles.
Compliance and reporting
Xolo executes the following compliance activities on behalf of your Estonian company:
Company registration;
Applying for and registering your VAT number;
Monthly VAT reporting (including OSS only for digital sales) - deadline on the 20th of the next month;
Monthly salary tax reporting (TSD) - deadline on the 10th of the next month;
Annual reporting - deadline on the 30th of June next year;
Registration and managing the company workers operating in Estonia (including the owner of the company) in the official Employment Registry (TÖR);
Forwarding you official letters sent to your company by different state authorities;
Submission of reports to Statistics Estonia;
Notifications of tax or other relevant law change with instructions, if necessary.
Sales
Invoicing and taxes
If a company buys or sells a service, it's required to classify it as a digital or professional service - due to accounting and VAT (value-added tax) rules.
More info: What is a digital service? and What is a professional service?
Whether or not VAT is added to an invoice depends on what type of service you’re selling, and to which countries.
More info: How does the VAT system work?
What you need to know
We recommend using Xolo’s sales invoice feature for invoicing;
Verify your customer’s EU VAT number here;
A sales invoice must be compiled for each sales transaction on your business bank account(s);
Find out if and when you need a VAT number.
Expenses
All your company expenses are managed from one place in the self-service - the “Expenses” section. When you make a purchase using your company card or pay an invoice, it will be displayed as an expense.
Payment receipts aren’t accepted as documents for accounting purposes because they only include some details of payments - such as who paid, when, and how much. Find a summary of all requirements for expense documents from the Xolo self-service help modal article: What if I'm unable to provide an expense document?
Examples of costs allowed to be claimed as business expenses are located here.
How to send expense documents
Xolo app is available on both the Apple App Store and Google Play;
Dedicated expense email address*.
*More details on each submission option including your dedicated email address can be found here.
What you need to know
An expense document is required for each payment from a vendor (the payment order is not sufficient);
Expense documents must be submitted at least once a month (no later than the 7th of the new month);
Missing documents are taxable as fringe benefits (it’s a combination of income tax 25% and social tax 33%);
Out-of-pocket expenses are costs related to your business that are paid using your personal money and later reimbursed from your company’s account (mark “Out-of-pocket” in self-service when uploading);
Please note we don’t support cash transactions (as we’re a fully online business).
Salaries and Dividends
Salaries
If you receive a salary from your company, taxes have to be declared and paid in the country where you are a tax resident as an individual person and/or where you perform your duties.
More details on taxes when operating outside Estonia and receiving funds can be found here.
Dividends
If you don’t take any money out of your company, you don’t need to pay corporate income tax in Estonia. If you receive dividends from your company, the corporate income tax is paid in Estonia. The rate is 20%, calculated as 20/80 from the net payment you receive.
The tax rate for regularly paid dividends is 14%, calculated as 14/86 from the net payment you receive. Companies that distribute profit and pay 14% CIT on it are additionally obliged to withhold income tax of 7% from dividends paid.
Paying dividends before declaring them with the annual report is not an option, also share capital must be paid in and registered.
More info: When can you pay dividends?
Hiring
Your company cannot hire anybody working outside Estonia on a permanent basis as an official employee on your company`s payroll.
If you need to hire somebody based outside Estonia, your Estonian company is a suitable model for hiring independent freelancers or subcontractors across the globe.
Requirements for hiring independent subcontractors are here.
Share capital and loans
Share capital
Starting on Feb 1st, 2023, the minimum share capital requirement for new companies has changed to at least 1 cent (up to a maximum of €50,000 without proof of payment) by law.
For companies established before Feb 1st, 2023, it is necessary to pay €2,500 as company share capital (the payment can be postponed and paid in installments).
Payment has to be made by you personally from your personal bank account in euros;
Each installment needs to have “Share capital payment” in the description;
Share capital can be used immediately for business expenses.
Loans
Loaning money to your company as a private person is allowed by Estonian business law.
State “Loan from shareholder” as the description of the transfer;
Once your company has sufficient funds in its bank account, the loan can be paid back at any time;
Creating an agreement between the shareholder (you) and the company for receiving a loan is voluntary.
Payment gateways and marketplaces
Xolo supports such payment gateways as PayPal and Stripe. When you start using payments through either, please let us know beforehand, as we'll need access to your transaction data for accounting purposes.
We support the following marketplaces: Paddle, Google Play, Apple App Store, and Amazon.